Update shows no change in 4th-quarter economic growth

Updated 3:50 pm, Tuesday, February 28, 2017

WASHINGTON — The U.S. economy grew at an anemic 1.9 percent rate in the fourth quarter, unchanged from an initial estimate, although consumers spent more than first thought.

The increase in the gross domestic product, the broadest measure of economic health, represented a significant slowdown from 3.5 percent growth recorded in the third quarter, the Commerce Department reported Tuesday.

The fourth-quarter figure was unchanged from the first estimate a month ago, although some of the components were revised. The government found that consumer spending grew at a faster rate, but spending by state and local governments and businesses was weaker.

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Growth for 2016 overall was just 1.6 percent, the poorest showing in five years. Since the recession ended in mid-2009, annual growth has averaged 2.1 percent, the worst performance for any recovery since the World War II period.

President Trump vowed during the campaign to double economic growth to 4 percent or better. He said his economic program of tax cuts, deregulation and increased spending in such areas as the military and infrastructure would boost the economy back to growth rates not seen on a sustained basis in decades.

However, Treasury Secretary Steven Mnuchin has lowered that projection. He has said he believes the Trump program would achieve growth of 3 percent or better, and that the improvements would probably not be felt until 2018.

Even a 3 percent growth goal is viewed by many economists as overly optimistic, given the headwinds the economy faces.

Many economists are forecasting growth for this year of between 2 and 2.5 percent. Some say growth could hit 3 percent in the second half of the year if elements of Trump’s economic program win approval in Congress by this summer.

Paul Ashworth, chief U.S. economist at Capital Economics, said that even with the fourth-quarter slowdown, the second half of 2016 was much better than the first half.

“The ... evidence recently suggests that growth will continue at a decent pace in the first half of this year,” he said, predicting GDP growth of 2.5 percent in the first quarter.

While the overall GDP figure in the fourth quarter was unchanged, the report Tuesday did show revisions to various components. Consumer spending, which accounts for 70 percent of economic activity, was revised to 3 percent growth, up from an initial estimate of 2.5 percent.

But spending by state and local governments was revised to 1.3 percent growth, just half the initial 2.6 percent estimate. Spending by businesses on equipment was revised to a 1.9 percent increase instead of the initial 3.1 percent estimate. Housing construction was trimmed to growth at a still-strong rate of 9.6 percent but lower than the initial 10.2 percent gain.

The release was the second of three estimates the government releases each quarter.